budget written on chalkbaord

FPS Budget Projections

By Fargo Public Schools Business Services Manager Broc Lietz

 

Fargo Public Schools is in the process of budget development for the 2017-18 fiscal year. As with each odd-numbered year, this planning is delayed based on the need to wait until the North Dakota Legislature adjourns and the K–12 funding formula is finalized. This legislative session wrapped up the week of April 24. Also, the Fargo School District recently received the 2017 City of Fargo Assessment Department Annual Report, which provides the property tax information necessary for us to properly estimate our annual property tax revenue.

The District uses a zero base budget philosophy for the general fund budget, which simply means we only budget for expenditures equal to expected revenue each year. The general fund operating budget is based solely on revenues collected in the fiscal year in which we are operating.

State Revenue
The 2017 ND legislative assembly approved a K–12 bill which includes a freeze on Student Foundation Aid payment for K–12 education at $9,646 per student for each of the next two years. This is the rate FPS currently receives from the previous biennium, so the funding rate is “flat.” It is very important to understand that flat funding is significantly different that being “held harmless.” In fact, Fargo Public Schools is projected to receive $1,060,125 less in State Foundation Aid in 2017–18 compared to 2016–17.

Why will there be less state revenue received?  This is due to the K–12 funding formula which requires a contribution from property tax revenue as a deduction from State Aid. The formula calls for a deduction equal to the value of 60 mills. For Fargo Public Schools, this deduction is $21,013,740 for 2017–18, compared to $19,074,780 in the current fiscal year. The increase in the deduction is due to the increase in the value of the local mill levy.

2016–17:  Mill Value: $317,913 x 60 mills = $19,074,780
2017–18:  Mill Value: $350,229 x 60 mills = $21,013,740

In previous years, the mill levy deduct was offset by two factors: an annual increase in per pupil aid from the state, and student growth.  For 2017–18, the per pupil payment will remain the same and the District’s current growth rate is not enough to offset the growth in local valuation.

In addition to flat funding per pupil allocations, the Transportation Revenue received by all school districts in the state through the formula for student transportation was reduced by a total of $1.6 million for the biennium. The Fargo Public Schools share of that reduction is estimated at $60,000 each year.

Local Revenue
In March 2017, Fargo Public Schools received a successful vote of the local taxpayers for a specified mill levy of 127 mills. This allows the District to collect property tax revenue on the valuation growth of property throughout the District. The 2017 City of Fargo Assessment Department Annual Report indicates that property within the boundary of Fargo Public Schools District #1 will increase 6.4% on average, bringing the value of 1 mill to $372,644. The District generally collects 96% of the property tax allotment in the year is it levied, bringing our total estimated property tax collection for 2017–18 to $45,432,720, compared to the current year collection of $42,697,658. This is an increase in property tax collection of $2,735,062.

2016–17:  Frozen Property Tax Collection = $42,697,658
2017–18:  127 mills x $372,644 per mill x 96% collection = $45,432,720

As discussed in the previous paragraph, total new dollars available from local tax collections includes a 60 mill deduct by the State K–12 funding formula. The net result of new property tax revenue minus a 60 mill deduct in state aid and reductions in State transportation funds indicates that Fargo Public Schools will have estimated new revenue of $1,614,937 for the 2017–18 school year.

 

 

In addition to overall adjustments made to state and local revenue, increased fixed expenses for the District (i.e. utilities, natural gas, water, sewer, garbage, etc.) are estimated to total $516,600. Therefore, the estimated new net revenue expected for 201718 equals $1,098,337.

Work to Do
You may recall that during the specified mill levy campaign, as part of the educational meetings and presentations, it was stated that a successful mill levy effort only “fixed” 30% of the District’s revenue challenges. Dr. Schatz also stated that the necessary revenue needed to simply cover the natural step and lane increases for all employee payroll increases throughout the District would require nearly $2 million.  Below is a more specific breakdown:

 

 

Salary and benefits make up approximately 78% of the 2016–17 overall $149.6 million operating budget of the school district, or $116.6 million. This leaves 22% of the expense budget (or $32.9 million annually) for items such as supplies, equipment, travel, nursing services, SRO services, building repair/maintenance, textbooks, technology, and extracurricular programming.

The new revenue projections indicate an estimated revenue increase of 0.93%. This reflects a significantly smaller increase than we have historically seen at Fargo Public Schools. With that, the District will still spend more money next year than we spend this year. As we continue to build the budget for next year, decisions will be made to ensure the quality of education and service that Fargo Public Schools provides for each of the next two years aligns with our mission of Educating and Empowering All Students to Succeed.